re. risk of stocks and calls...
As probably every here knows I hold a few positions of bluechips (SAP, Dell, GE...) since a few month in cash. Why? I want have a certain amount of assets outside of my daily "gambling" (TB!) - and in a manner of diversifying, outside of this proud land.
What I musted learn is that we have in US - and even in Germany, Steve! (maybe we use drums and smoke-signals, but it works!) - a traders paradise compared to Swizzerland. You can give orders there, but then... somewhere, sometimes, somehow - it's like South-Side-Story. And they take nearly 2 (t-w-o) percents for every trade.
Back to risks: Following DJ's recommendations, I bought SAP at the best worst moment - taking up to 50% loss. OK - probably this will become a temporary loss, but nobody could be sure about "temporary".
Similar losses in Dell and GE helped to produce red number of up to 250k in my portfolio.
I could have the same investment buying leaps - with a lot less money needed, with a lot less - temporary or not - loss and with the same power to bring earnings in the case of a successful developement of my bets.
I learned from that on thing: I ever was considering WHY I was that successful with my trades in the past - overall, of course. What I learned is the positive effect of leaps-"investing" is not the greater leverage but the enormous limitation of risk: Means, IF it happened, it caused by far less pain. And - as we all know - "it" happens sometimes, even TB musted cash in a loss after 9 gaining trades.
This can also expand our earlier discussion about "how far from the money". As you possibly remember, I use to buy far from the money - mostly as far as possible, related to the options price. This is not a gain-optimizing-strategy, it's a loss-minimizing-stratety. Of course, "strategy" is a great term considering that I didn't do that "calculated". But I think, it's the gaz my machine is running with.
Hope it wasn't to boring for you experts.
Jury |
